Getting the right indemnity cover for your work

Many people who give advice or professional services are asked to hold indemnity cover. The request may come from a regulator, a professional body or a client.

The usual name for it is professional indemnity insurance, often shortened to PI. These notes explain how it works, so you can arrange cover that fits the work you do.

What the cover is for

PI cover responds to claims from clients about your work. The insurer will often appoint lawyers to defend a claim and pay their costs. That help is there even when a claim does not succeed.

The Nursing and Midwifery Council puts the aim simply. Your cover should match the risks of your practice, so that it is enough if a claim against you succeeds.

Who is asked to hold it

Each profession sets its own rules, so your regulator is the first place to look.

ICAEW chartered accountants with a practising certificate who are in public practice must hold PI, whatever their fee income. Since September 2024 the minimum cover has been £250,000 in the aggregate.
Nurses, midwives and nursing associates must have an indemnity arrangement whenever they practise in the UK. The NHS covers its own employees for their NHS work. People who are self-employed or work through an agency will probably need their own.
Architects in business or practice are expected to hold adequate insurance under Standard 4 of the Architects Code. This is usually PI.

How the timing works

PI is usually written on a claims made basis. The policy covers claims made while it is in force, whenever the work was done. So the policy has to be active on the day a claim arrives.

This is why steady, unbroken cover is worth planning for. ICAEW, for example, asks for at least six years of retroactive cover. That means cover for claims about work from the last six years. It also suggests getting ready for renewal early.

Giving the insurer the full picture

The Insurance Act 2015 sets a duty of fair presentation. Before cover starts, you tell the insurer every material fact you know or ought to know. You set it out in a way a careful insurer can follow.

ICAEW suggests being open about the work you do, your claims history and any possible claims. It also mentions your approach to managing risk and any disciplinary history. A full and early account helps insurers reply in good time.

Telling your clients

If you must hold professional liability insurance, the Provision of Services Regulations 2009 ask you to make details of it available to clients. These include the insurer's contact details and where in the world the cover applies.

When you stop work or sell up

Claims can arrive years after the work is finished. Run-off cover deals with claims made after you stop, about work you did before.

ICAEW asks for six years of run-off, in line with the usual time limit for professional negligence claims. The first year often costs about the same as cover while trading. ICAEW also notes that few insurers take on run-off for a firm another insurer covered. So it helps to raise run-off early and include its cost in your plans for retirement or a sale.

Checking a firm, and where to go with a complaint

Nearly all firms offering financial services in the UK must be authorised or registered by the Financial Conduct Authority. You can check a firm on its register before you buy.

If something goes wrong, complain to the firm first. The Financial Ombudsman Service is free and can look at complaints from individuals, small businesses and micro-enterprises.